Finance, Economic Development and Investment Promotion Deputy Minister Kudakwashe Mnangagwa has told Parliament that the Intermediate Money Transfer Tax (IMTT) will not be reduced on the Zimbabwe Gold (ZiG) as the government is prioritising revenue collection.
Intermediate Money Transfer Tax is tax chargeable on electronic financial transactions such as bank transfers and mobile money transfers. It is calculated at the rate of 2% of the transaction amount.
The IMTT is expected to have a huge impact on the Zimbabwe Gold which is mostly available electronically. The government is currently drip-feeding it into the economy.
However, responding to a question from Honourable Matinenga in the National Assembly on whether the tax will make it costly to trade in ZiG, the Deputy Minister said the government is aware.
He said they are currently leaning towards revenue collection rather than towards financial inclusion.
‘’Increasing the transaction cost does indeed dissuade the general populace from transacting electronically, but this is something we have had to deeply introspect upon trying to balance the need to collect revenue versus the effort of allowing everybody to be financially included.
‘’At this juncture Mr. Speaker, we are still leaning towards the revenue collection necessity and we will continue to monitor as we go along, whether this skew hinders people from entering the realm of financial inclusion and electronic transactions upon which we can review,’’ he said.
IMTT Tax on ZiG and US dollar now standardised
Mnangagwa added that IMTT on US dollar transactions was increased to create equality between the dollar and the ZiG.
‘’To provide fuller context, this would be in comparison to the use of the US dollar. The Ministry of Finance, through the Minister who issued an S.I. a few days ago, increased the IMTT on the US dollar transactions.
‘’Prior to that, the IMTT on US dollar electronic transactions was 1%. It has now been equated to the ZiG IMTT which puts the two currencies at par.
‘’What that does is that it becomes the same to transact in either currency, henceforth, one is not deterred by the IMTT itself on the currency of choice,’’ he said.
What is ZiG?
The ZiG is Zimbabwe’s currency introduced on the 5th of April to replace the Zimdollar that had lost value. The ZiG is denominations of 1 ZiG, 2 ZiG, 5 ZiG, 10 ZiG, 20 ZiG, 50 ZiG, 100 ZiG, and 200 ZiG. For divisibility, there is going to be half ZiG and a quarter ZiG.
According to Reserve Bank of Zimbabwe Governor John Mushayavanhu, the ZiG is a structured currency and is backed by foreign currency reserves and gold.
What is a structured currency?
The Governor said ‘’a structured currency is generally defined as a currency that is pegged to a specific exchange rate or currency basket and backed by a bundle of foreign exchange assets, potentially including gold. This means that the central bank can only issue domestic notes and coins when fully backed by foreign reserve currency or foreign exchange assets and that the currency is fully convertible in the reserve currency on demand, that is the definition of a structured currency.
IMTT Tax on ZiG will remain, our priority is currently on revenue collection: Govt
